Philippine Air Approved to Exit Bankruptcy, Cut Debt Load
(Bloomberg) -- Philippine Airlines Inc. won court approval for its reorganization plan, paving the way for the carrier to exit bankruptcy, cut $2 billion in debt and revive its fortunes after a slump in international travel.
U.S. Bankruptcy Judge Shelley Chapman said Friday that she would approve the Chapter 11 plan after unsecured creditors voted to back the proposal. The reorganization didn’t face any major opposition from debt holders.
“This case is a model for what can be accomplished in Chapter 11,” Chapman said. “You’ve achieved overwhelming consensus.”
The company expects to emerge from the court-supervised Chapter 11 process before the end of 2021 and after completing “a few more procedural steps,” it said in a statement on Saturday.
The global aviation sector has taken a beating as international travel ground to a halt due to Covid-19. The emergence of the omicron virus variant has triggered new border restrictions and business closures, clouding the outlook for recovery.
The flagship carrier, majority owned by billionaire Lucio Tan, is one of several to enter debt restructuring in the U.S., which companies often consider a preferred location. Aeromexico and Colombia’s Avianca Holdings sought court protection in New York last year.
Philippine Airlines had already gotten a green light to access $505 million worth of equity and debt financing to help it meet obligations. The company on Saturday also said the plan provides for more than $2 billion in permanent balance sheet reductions from existing creditors and allows the carrier to consensually contract fleet capacity by 25%.
The outcome of its New York proceedings could set a precedent for carrier PT Garuda Indonesia, which was ordered by judges in Jakarta to embark on a court-supervised debt restructuring process.
The “court approval represents a critical moment in our journey to emerge as a stronger airline,” Philippine Airlines President Gilbert Santa Maria said. The company flies to 32 international and 29 domestic destinations from its three hubs in the Southeast Asian nation.
The case is Philippine Airlines Inc., 21-11569, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
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